Extensions on federal unemployment benefits for "99 weekers," those out of work for 99 weeks or more, expire this month. Critics say the move could raise the odds the economy will tumble into recession next year, and the weak May jobs report only adds to concerns.

But the policy shift won't have much of an effect on payroll employment data, says Jesse Rothstein, a former chief economist for the U.S. Department of Labor who teaches at UC Berkeley. If anything, he adds, the loss of benefits would reduce consumption by credit-constrained people, reduce aggregate demand and result in additional layoffs.

Ouch! The coming expiration of long-term jobless benefits could increase the chances of a U.S. recession next year.
William Waitzman for Barron's

Congress curtailed jobless benefits in the hope of nudging idled workers to seek jobs. Stanford economics researcher Camille Landais, citing evidence from Germany, Austria and the U.S., maintains that a 10% increase in the duration of such benefits increases the length of unemployment about 2%. Landais says that the focus should be not on the duration of benefits, but on what's behind the long-term unemployment trend. Census Bureau figures show that the majority of the jobless have no liquid assets. One fear: Such people might seek disability benefits and permanently drop out of the labor force. Congress's action won't necessarily affect the widely followed reports on unemployment from the Bureau of Labor Statistics, whose data reflect unemployment duration and not the receiving of benefits.

Johannes Schmieder, who teaches economics at Boston University, would leave the unemployment benefit extension at 99 weeks, and instead monitor more closely whether people are actively looking for jobs. "Right now, in many states, the only way unemployed people are monitored is by automated phone calls," he says. "You may get a phone call, and a computer asks you: 'Are you looking for a job? Press one if yes, press two if no.' If one, they still get unemployment insurance benefits."